Talent management, or the management of a company’s human capital, has traditionally been delineated with multilevel organization charts that assign levels of authority with lines of responsibility. In their new book, Talent Wins: The New Playbook for Putting People First, Ram Charan (the world-renowned business consultant), Dominic Barton (Global Managing Partner of McKinsey and Co.) and Dennis Carey (Vice Chairman of Korn Ferry) argue that such an approach should be left back in the 20th century. HR processes and development plans that assume predictable environments for years ahead now have the potential to seriously undermine the future growth of an organization.
To survive in today’s “agile, digital, analytical, technologically driven strategic environment,” the authors argue, requires a completely different playbook. The acquisition, management and deployment of human capital must be approached with the same rigor as is the management of financial capital.
A New Definition of TSR
The board of directors of any commercial venture is usually focused on one primary goal — total shareholder return (TSR). That commitment typically includes an acknowledgment of the importance of people in achieving that goal. The authors argue that in order to successfully manage the transformation to a talent-first organization, a new definition of that TSR goal is needed: talent, strategy and risk. This may seem, at first glance, nothing more than wordsmithing to use an existing acronym, but the reality, it is argued, “entails a profound, company-wide shift in mindset, attention, energy and the content of work.“ The authors break the transformation process down into seven actionable steps:
- Forge the tools of transformation in three steps: First, build a core executive group — the “G3” — of the CEO, CFO and a CHRO. Second, identify the “critical 2 percent” of your talent in the organization (who may not necessarily be your top-tier people). Third, invest in the best “talent technology” (software-applications examples are provided).
- Energize the board through reorganization and reprioritization to embrace the new TSR. One example: Refocus the “compensation committee,” which is traditionally focused on senior executive compensation, as a “talent committee” that manages the compensation of the “critical 2 percent.”
- Design and redesign the work of the organization to “create a more horizontal, flexible structure that connects and multiplies talent.” Talent-first organizations have no room for fiefdoms or power-grabs. The focus is on agility and meaning.
- Reinvent HR. This involves more than just giving HR “a seat at the table.” Managing human capital as effectively as financial capital demands a CHRO “who is as committed, talented and empowered as the CFO.” If HR is to be the new creator of value, the traditional administrative tasks must be automated or outsourced.
- Scale up individual talent. Skill obsolescence is a nerve-racking reality for employees and executives alike. Talent development must be more reflective of the individual needs of the employee to maximize value creation, rather than following training roadmaps for established boxes on the organization chart.
- Create an M&A strategy for talent. Pursue new talent with the same efficacy with which you would pursue a potential business acquisition.
- Drive the talent playbook. It should be owned and run by the CEO, even if it requires delegation of some current responsibilities in order to free up time to “get granular on HR issues.”
Talent Wins conveys a clear message with an admirable sense of urgency. Utilizing an impressive range of case examples from such forward-thinking companies as Amgen, ING, Tata Communications and Volvo, the authors present a practical and pragmatic map for managing human capital with the same rigor as that used for the management of financial capital.